Journal Article
The Goldilocks Problem: How to get Incentives and Default Waterfalls “Just Right”
McPartland, John; Lewis, Rebecca (2017)
Regulatory reforms in the wake of the 2007?08 financial crisis have increased the focus on the systemic importance of central counterparties (CCPs), which guarantee the performance of their clearing members? financial contracts.1 This, in turn, has increased policymakers? and practitioners? focus on risk management at CCPs. A key component of any CCP?s risk-management strategy is the CCP?s default waterfall. The default waterfall stipulates the sequence of financial resources that a CCP can draw upon to cover the unsatisfied financial obligations of a defaulted clearing member. At the top of ...
Economic Perspectives , Issue 1 , Pages 1-13